HoKTok, through TARDIS currently operates five thousand call boxes around Australia, which has a “small population spread across vast areas” (The Communication Law Centre, p. 2). It offers untimed calls at a fixed rate of $0.40c. This popular service, unfortunately, is no longer profitable. The key to TARDIS’s popularity is its fixed charge on untimed calls.
Changing this fixed price could negatively affect consumer choice. As part of the Australian telecoms industry, TARDIS must endeavor to provide services that, “best meet the social, industrial, and commercial needs of the people of Australia” (Bolton et al, 1993, p. 32). It is recognized that telecommunication technology “continually shapes the very fabric of our global society” (Hill Associates, 2002, p. xvii).
The basic strategy for returning TARDIS to profitability requires either, a reduction in overheads while maintaining current revenues or increase in revenues while maintaining overheads at the current levels. To attain profitability, Howard advices that, “you must first wake up to the internal rules you are currently playing by and expand you field of possibilities” (2004, p. xvii)
Increasing revenues is a better way of assuring profitability compared to reducing overheads. This is because other parties set the cost of most overheads and these costs will continue to rise, eating into HoKTok’s margin. HoKTok cannot pay less for the services it consumes to run TARDIS, but will actually pay more in the future.
Similarly, it cannot reduce its workforce in order to spend less on the wage bill because this may compromise service delivery and may actually end up risking the current revenues. In addition, it cannot reduce the workers’ wages without precipitating labor unrest. Baker warns that. “Labor will not permit a reduction in the standard of living” (2009, p. 5).
Katz adds that many companies struggle with “how to reduce labor costs while retaining employee commitment and an appropriate skill base” (1997, p.3). While HokTok must continue to “implement various measures to lower cost” (Suzue, 2002, p. 1), it cannot rely on them to regain profitability. This should not encourage HoKTok to make cost discipline, “an incidental reaction to events” (Institute of Management and Administration, 2006, p. 3)
TARDIS can return to profitability by introduction of prepaid cards, optimization of profitable segments of the market and introducing a service for call centers and telemarketing companies. Introduction of prepaid cards will secure revenue. It will lock our clients in the network and it will mean they will always have to find a TARDIS call box from which they can make their calls. The idea of being locked-in may not be very attractive to clients, and will require a careful marketing campaign to ensure acceptance of the cards.
Optimization of the profitable market segments means that HokTok increases the number of call boxes located in areas where clients naturally call for shorter periods such as airports, train stations, and bus stops and reduces the call boxes near schools, restaurants, and residential areas where callers talk for longer.
The third option is introducing TARDIS to new clientele such as call centers and telemarketing firms whose business depend on volume of calls. Since they aim at making the most number of calls per unit time, they will provide a larger revenue base for TARDIS. In fact, it is possible to offer them lower call rates per call and break even on the assured call volumes. However, we must take into account Retske’s insight that, if prices are “set too low, profit opportunities will be missed” (2002, p. 172).
On a priority basis, I recommend that we pursue optimization of profitable market segments. This will see TARDIS increasing the number of call boxes in areas where callers take a shorter time per call, while reducing the number of call boxes where callers take longer. No substantial investment is required to move some of the call boxes from high cost market segments to low cost market segments. We must act quickly ahead of our competitors because in the telecommunication industry, services “spring up and quickly” (Peterson, 2000, p.9).
References
Baker, RS 2009, The new industrial unrest: reasons and remedies. Cornell University Press, New York.
Bolton et al 1993, The communication service: Negotiating structural and technological change. International Labor Organization, Geneva.
Hill Associates 2002, Telecommunications: A beginner’s guide. McGraw-Hill/Osborne, California.
Howard, C 2004, Turning passions into profits: Three steps to wealth and power. John Wiley and Sons, New Jersey.
Institute of Management and Administration 2006, Cost reduction and control best practices: The best ways for a financial manager to save money. John Wiley and Sons, New Jersey.
Katz, HC 1997, Telecommunications: Restructuring work and employment relations worldwide. Cornell University Press, New York.
Peterson, KD 2000, Business telecoms systems: A guide to choosing the best technologies and services. CMP Books, New York
Retske, G 2002, A guide to competitive international telecommunications. CMP Books, New York.
Suzue, T 2002, Cost half: The method for radical cost reduction. Productivity Press, New York.
The Communication Law Centre 2004, Australian telecommunications regulation. University of South Wales press Ltd, Sydney.